On 15 September 2010, the United States requested consultations with China with respect to measures imposing countervailing duties and anti-dumping duties on grain oriented flat-rolled electrical steel (“GOES”) from the United States as set forth in Ministry of Commerce of the People's Republic of China (“MOFCOM”) Notice No. 21 [2010], including its annexes. The subsidy that China determined to confer a benefit are the “Buy America” provisions of the American Recovery and Reinvestment Act of 2009 and also State government procurement laws.

The United States alleged that China appears to be acting inconsistently with its obligations under:

Articles 1, 3.1, 3.2, 3.5, 6.9 and 12.2 of the Anti-Dumping Agreement; and

Article VI of the GATT 1994.

On 11 February 2011, the United States requested the establishment of a panel. At its meeting on 24 February 2011, the DSB deferred the establishment of a panel.

Panel and Appellate Body proceedings

At its meeting on 25 March 2011, the DSB established a panel. The European Union, Honduras, India, Japan, Korea and Viet Nam reserved their third party rights. Subsequently, Argentina and Saudi Arabia reserved their third party rights. On 10 May 2011, the panel was composed. On 19 September 2011, the Chairman of the panel informed the DSB that the timetable adopted by the panel after consultations with the parties, envisages that the final report shall be issued to the parties by May 2012. The panel expects to conclude its work within that time-frame.

On 15 June 2012, the panel report was circulated to Members.

Summary of key findings

1. This dispute concerned measures imposing countervailing and anti-dumping duties on grain oriented flat-rolled electrical steel (“GOES”) from the United States. The measures were imposed by China's Ministry of Commerce (“MOFCOM”) and the United States claimed that they were inconsistent with China's commitments and obligations under the Anti-Dumping Agreement, the SCM Agreement and the GATT 1994.

The United States' claims with respect to initiation of certain countervailing duty investigations

2. The United States claimed that China acted inconsistently with Articles 11.2 and 11.3 of the SCM Agreement because MOFCOM initiated countervailing duty investigations into 11 programmes without sufficient evidence to justify this. The Panel concluded that the obligation upon Members in relation to the sufficiency of evidence in a countervailing duty investigation finds expression in Article 11.3 of the SCM Agreement, which provides that an investigating authority must assess the accuracy and adequacy of the evidence in an application to determine whether it is sufficient to justify initiation. The Panel reached its conclusions by reference to the requirements for “sufficient evidence” set forth in Article 11.2, but did not consider it necessary to reach separate conclusions under this provision. With respect to each of the 11 programmes at issue, the Panel concluded that China had acted inconsistently with Article 11.3 of the SCM Agreement.

The United States' claims with respect to the non-confidential summaries

3. The applicants for initiation sought and obtained from MOFCOM confidential treatment in relation to a number of categories of information. The United States claimed that MOFCOM acted inconsistently with Articles 12.4.1 of the SCM Agreement and 6.5.1 of the Anti-Dumping Agreement by failing to require the applicants to submit adequate non-confidential summaries of the information. The Panel upheld the United States' claim. The Panel concluded that the purported summaries did not provide a reasonable understanding of the substance of the information submitted in confidence.

The United States' claim with respect to public notice of the calculations used to determine the dumping margins

4. The United States claimed that MOFCOM did not disclose the data and calculations it used to arrive at the dumping margins for the two respondent companies and that this was inconsistent with Article 12.2.2 of the Anti-Dumping Agreement. The Panel rejected the United States' claim. The Panel could not find within the text of Article 12.2.2 an obligation to include in the relevant public notice or separate report the confidential data and calculations underlying a dumping margin.

The United States' claim with respect to public notice of the findings and conclusions leading to MOFCOM's benefit determination under the government procurement statutes

5. The United States claimed that MOFCOM did not adequately explain, in either the preliminary or final determinations, why the exclusion of foreign producers from the competitive bidding process under the United States Government procurement statutes led to the conclusion that the resulting prices were not market prices for the purposes of the benefit determination. According to the United States, this was inconsistent with Article 22.3 of the SCM Agreement. The Panel rejected the United States' claim. The Panel held that Article 22.3 does not discipline the substantive adequacy of an investigating authority's reasoning. In the Panel's view, MOFCOM included in its public notice the findings and conclusions on matters of law that it considered material, and also referred to the material facts it was relying upon to reach those conclusions.

The United States' claims with respect to the use of facts available

6. The United States brought a number of claims regarding MOFCOM's resort to facts available in calculating certain dumping and subsidy rates. Although the Panel rejected the United States' claim that MOFCOM improperly resorted to facts available to calculate the subsidy rates for the two known respondent exporters, the Panel concluded that the manner in which MOFCOM applied facts available was inconsistent with Article 12.7 SCM Agreement.

7. The Panel upheld the United States' claim that China had acted inconsistently with Article 6.8 and paragraph 1 of Annex II of the Anti-Dumping Agreement and Article 12.7 of the SCM Agreement because MOFCOM improperly resorted to facts available in calculating the dumping and subsidy rates for exporters that were unknown to it.

8. The United States also brought claims under Articles 6.9, 12.2 and 12.2.2 of the Anti-Dumping Agreement and Articles 12.8, 22.3 and 22.5 of the SCM Agreement, arguing that China did not disclose the essential facts, or provide in sufficient detail in its final determination the findings and conclusions leading to the application of facts available to “unknown” United States exporters. The Panel upheld the United States' claims in this regard.

The United States' claims with respect to MOFCOM's price effects analysis

9. The United States challenged MOFCOM's finding that the dumped and subsidized imports had significant price effects. The United States contended that MOFCOM's analysis of these price effects was conclusory, failed to reflect an objective examination of the evidence, and was not based on positive evidence. The Panel upheld the United States' claims, finding that China had acted inconsistently with Articles 3.1 and 3.2 of the Anti-Dumping Agreement, and Articles 15.1 and 15.2 of the SCM Agreement.

10. The United States also claimed that China did not disclose the essential facts supporting its price effects analysis and did not offer an adequate explanation for its price effects findings, in violation of Articles 6.9 and 12.2.2 of the Anti-Dumping Agreement and 12.8 and 22.5 of the SCM Agreement. The Panel also upheld these claims.

The United States' claims with respect to MOFCOM's causation analysis

11. The United States claimed that MOFCOM's causation analysis was inconsistent with Articles 3.5 of the Anti-Dumping Agreement and 15.5 of the SCM Agreement, on the basis that MOFCOM erroneously concluded that the rapid increase in the capacity of the domestic GOES industry during the period of investigation could not have been a cause of injury to the domestic industry. The United States also claimed that MOFCOM's analysis was inconsistent with Articles 3.1 of the Anti-Dumping Agreement and 15.1 of the SCM Agreement because it did not comply with the “objective examination” and “positive evidence” requirements embodied in those provisions. The Panel upheld the United States' claims.

12. The United States also claimed that China acted inconsistently with Articles 6.9 and 12.2.2 of the Anti-Dumping Agreement and 12.8 and 22.5 of the SCM Agreement, on the basis that China failed to disclose the essential facts supporting its analysis and did not provide an adequate explanation for its causation findings. The Panel upheld these claims.

On 20 July 2012, China notified the DSB of it decision to appeal to the Appellate Body certain issues of law and legal interpretations covered in the panel report. On 18 September 2012, the Chair of the Appellate Body informed the DSB that due to the time required for completion and translation of the report, the Appellate Body would not be able to circulate its report within the 60‑day period. It was estimated that the Appellate Body report would be circulated no later than 18 October 2012.

On 18 October 2012, the Appellate Body report was circulated to Members.

Summary of key findings

China’s appeal was limited to the Panel’s findings in relation to MOFCOM’s price effects finding and the related disclosure of underlying facts. China claimed that the Panel erred in the interpretation and application of Article 3.2 of the Anti-Dumping Agreement and Article 15.2 of the SCM Agreement in finding that China acted inconsistently with Articles 3.1 and 3.2 of the Anti-Dumping Agreement and Articles 15.1 and 15.2 of the SCM Agreement. China also claimed that the Panel erred in finding that China acted inconsistently with Articles 6.9 and 12.2.2 of the Anti-Dumping Agreement, and Articles 12.8 and 22.5 of the SCM Agreement, in relation to MOFCOM’s final disclosure, and public notice and explanation, of the facts underlying its price effects finding.

The Appellate Body upheld the Panel’s finding that MOFCOM’s price effects finding was inconsistent with Articles 3.1 and 3.2 of the Anti-Dumping Agreement and Articles 15.1 and 15.2 of the SCM Agreement. The Appellate Body interpreted Article 3.2 of the Anti-Dumping Agreement and Article 15.2 of the SCM Agreement as requiring an investigating authority to consider the relationship between subject imports and the prices of the like domestic products so as to understand whether the volumes and/or prices of subject imports provide explain the occurrence of significant depression or suppression of domestic prices. Like the Panel, the Appellate Body rejected China’s interpretation that Articles 3.2 and 15.2 merely require an investigating authority to consider the existence of price depression or suppression, and do not require the consideration of any link between subject imports and these price effects.

With regard to the Panel’s application of the legal standard under Articles 3.2 and 15.2, read together with Articles 3.1 and 15.1, the Appellate Body found that the Panel was correct to conclude that MOFCOM’s finding as to the “low price” of subject imports referred to the existence of price undercutting, and that MOFCOM relied on this factor to support its finding of significant price depression and suppression. The Appellate Body also found that the Panel did not improperly disregard the parallel price trends of subject imports and domestic products, or the role that the increase in the volume of subject imports played in MOFCOM’s price effects finding. Although the Appellate Body considered that the Panel did not properly examine the effect of a policy aiming at undercutting domestic prices, it found no basis to reverse the Panel’s price effects finding in this case. Moreover, the Appellate Body found that the Panel did not act inconsistently with its duty to make an objective assessment under Article 11 of the DSU.

The Appellate Body upheld the Panel’s finding that China acted inconsistently with Article 6.9 of the Anti-Dumping Agreement and Article 12.8 of the SCM Agreement. The Appellate Body agreed with the Panel that MOFCOM failed to disclose in its preliminary determination and its final injury disclosure document all the “essential facts” relating to the “low price” of subject imports on which it relied for its price effects finding. The Appellate Body also upheld the Panel’s finding that China acted inconsistently with Article 12.2.2 of the Anti-Dumping Agreement and Article 22.5 of the SCM Agreement because MOFCOM failed to disclose in its final determination “all relevant information on the matters of fact” relating to the “low price” of subject imports on which it relied for its price effects finding. In both instances, the Appellate Body found that MOFCOM was required to disclose under Articles 6.9 and 12.2.2 of the Anti-Dumping Agreement and Articles 12.8 and 22.5 of the SCM Agreement the price comparisons of subject imports and domestic products that were necessary to understand MOFCOM’s finding regarding the “low price” of subject imports.

At its meeting on 16 November 2012, the DSB adopted the Appellate Body report and the panel report, as upheld by the Appellate Body report.

Reasonable period of time

At the DSB meeting on 30 November 2012, China stated that it intended to implement the DSB recommendations and rulings in a manner that respects its WTO obligations. China added that it would need a reasonable period of time to do so. On 8 February 2013, the United States requested that the reasonable period of time be determined through binding arbitration pursuant to Article 21.3(c) of the DSU. On 22 February 2013, the United States requested the Director-General to appoint the arbitrator. On 28 February 2013, the Director-General appointed Mr Claus-Dieter Ehlermann to act as arbitrator under Article 21.3(c) of the DSU. On 4 March 2103, Mr Ehlermann accepted this appointment.

On 3 May 2013, the arbitration report was circulated to Members.

WTO Arbitrator determines “reasonable period of time” in China — Countervailing and Anti Dumping Duties on Grain Oriented Flat-Rolled Electrical Steel from the United States (“China — GOES”) trade dispute

A WTO Arbitrator, Mr. Claus-Dieter Ehlermann, on 3 May 2013, issued his Award regarding the “reasonable period of time” for the implementation of Dispute Settlement Body recommendations and rulings in the dispute China — Countervailing and Anti-Dumping Duties on Grain Oriented Flat-Rolled Electrical Steel from the United States (DS414). The Arbitrator determined that the “reasonable period of time” for China to implement the recommendations and rulings of the DSB in this dispute is 8 months and 15 days from the adoption of the Panel and Appellate Body Reports, that is, until 31 July 2013.

On 19 August 2013, China and the United States informed the DSB of Agreed Procedures under Articles 21 and 22 of the DSU.

Compliance proceedings

On 13 January 2014, the United States requested consultations pursuant to Article 21.5 of the DSU. On 13 February 2014, the United States requested the establishment of a compliance panel. At its meeting on 26 February 2014, the DSB agreed to refer to the original panel, if possible, the matter raised by the United States. The European Union, India, Japan and Russia reserved their third-party rights. On 17 March 2014, the compliance panel was composed. On 22 September 2014, the Chair of the compliance panel informed the DSB that the compliance panel expects to issues its final report to the parties in the second quarter of 2015.

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